Harmonization of Business Zakat and Taxation in Malaysia

Abstract

This paper aims to examine the relationship between business zakat accounting and taxation in Malaysia according to the Income Tax Act 1967. In Malaysia, there are two types of business zakat accounting methods which are commonly practiced, namely, the adjusted working capital method and the adjusted growth capital method. It is argued that those methods demonstrate none relationship between business zakat accounting method and tax on business income due to the different sources of information usage. Whilst both methods of business zakat accounting use data from the balance sheet, business taxation gains information from the income statement. The arising question is, if the assessment of businesszakat depends on those methods, do entrepreneurs get benefits from the income tax imposed to them? If not, in what way they can uti.lise it? The findings show that entrepreneurs are allowed to use any methods that fit in with their types of businesses. They are also able to use business zakat accounting method which based on income in the process of assessing the business zakat respectively.